Titan Machinery (TITN) Q3 2021 Earnings Call Transcript

Titan Machinery (TITN 0.52%)
Q3 2021 Earnings Call
Nov 24, 2020, 8:30 a.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

Greetings, and welcome to the Titan Machinery Inc. third-quarter 2021 earnings call. [Operator instructions] As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Mr.

John Mills with ICR. Thank you. You may begin.

John Mills -- Investor Relations, ICR

Thank you. Good morning, ladies and gentlemen, and welcome to the Titan Machinery third-quarter fiscal 2021 earnings conference call. On the call today from the company are David Meyer, chairman and chief executive officer; Mark Kalvoda, chief financial officer; and Bryan Knutson, chief operating officer. By now, everyone should have access to the earnings release for the fiscal third quarter ended October 31, 2020, which went out this morning at approximately 6:45 a.m.

Eastern Time. If you have not received the release, it is available on the Investor Relations page of Titan's website, at ir.titanmachinery.com. This call is being webcast, and a replay will be available on the company's website as well. In addition, we are providing a presentation to accompany today's prepared remarks.

You may access the presentation now by going to Titan's website at ir.titanmachinery.com. The presentation is available directly below the webcast information in the middle of the page. You'll see on Slide 2 of the presentation our safe harbor statement. We would like to remind everyone that the prepared remarks contain forward-looking statements, and management may make additional forward-looking statements in response to your questions.

These statements do not guarantee future performance, and therefore, undue reliance should not be placed upon them. These forward-looking statements are based on current expectations of management and involve inherent risks and uncertainties, including those identified in the Risk Factors section of Titan's most recently filed annual report on Form 10-K as updated in subsequent to filing quarterly reports on Form 10-Q. These risk factors contain a more detailed discussion of the factors that could cause actual results to differ materially from those projected in any forward-looking statements. Except as may be required by applicable law, Titan assumes no obligation to update any forward-looking statements that may be made in today's release or call.

Please note that during today's call, we'll discuss non-GAAP financial measures, including results on an adjusted basis. We believe these adjusted financial measures can facilitate a more complete analysis and greater transparency into Titan's ongoing financial performance, particularly when comparing underlying results from period to period. We've included reconciliation of these non-GAAP financial measures to their most directly comparable GAAP financial measures in today's release. The call will last approximately 45 minutes and at the conclusion of our prepared remarks, we will open the call to take your questions.

Now, I'd like to introduce the company's chairman and CEO, Mr. David Meyer. Go ahead, David.

David Meyer -- Chairman and Chief Executive Officer

Thank you, John. Good morning, everyone. Welcome to our third-quarter fiscal 2021 earnings conference call. On today's call, I will provide a summary of our results, and then Bryan Knutson, our chief operating officer, will give an overview for each of our business segments.

Mark Kalvoda, our CFO, will then review financial results for the third quarter of fiscal 2021 and provide an update to our full-year modeling assumptions. If you turn to Slide 3, you will see an overview of our third-quarter financial results. We generated third-quarter revenue of $361 million, which exceeded our expectations due to strong parts and service performance in our agriculture segment and better-than-anticipated equipment sales in our construction and international segments. The stronger revenue, combined with our continued success in controlling operating expenses and driving down interest expense, resulted in a 24% improvement to our adjusted pre-tax income of $17.5 million and 21% growth in our adjusted earnings per diluted share of $0.58.

Before I turn the call over to Bryan, I want to thank all our customers and employees who in the face of a pandemic and weather challenges demonstrated their resilient nature, which is fundamental to the industries we operate in. I will now turn the call over to Bryan to review our three segments in more detail.

Bryan Knutson -- Chief Operating Officer

Thank you, David, and good morning, everyone. I'm excited to cover our three business segments this morning and will be available for Q&A after our formal presentation. On Slide 4 is an overview of our domestic agriculture segment. Fall harvest conditions were ideal across most of our footprint.

We experienced wide variability in crop yields, both within individual farming operations and across our entire footprint. However, overall yields were generally average to above average. Most of the variability was weather-related. However, in some cases, yields suffered due to lack of the previous year's fall tillage which resulted in less-than-ideal planting conditions.

Nonetheless, the excellent weather in September and October provided for an extremely efficient harvest this year and allowed for the necessary time to complete proper fault tillage to get most fields in good to excellent condition for next year's planting season. We believe these optimized conditions, coupled with increased commodity prices and USD support programs have led to a substantial improvement in farmer sentiment. Our business is well-positioned to support the aging fleet of equipment with our focused parts and service strategies. We continue to pursue consistent growth in parts and service revenue, which is supporting strong gross profit margins and driving pre-tax income.

In addition to this critical parts and service contribution, we continue to see replacement demand, precision technology, and connected machines is ongoing catalyst for new equipment purchases. As we look to the fourth quarter, we expect the momentum within our ag segment to continue. We believe that the combination of replacement and technology demand, favorable yields, high commodity prices, and the current Section 179 tax incentives should drive demand and make for a strong finish to our fiscal year. Turning to Slide 5.

You will see an overview of our domestic construction segment. Although our Construction Equipment segment continues to feel the economic impact of COVID-19 and depressed oil prices, we are seeing improving industry trends due to low interest rates, economic stabilization, net farm income growth, and continued optimism for future infrastructure investment. The operational improvements that our team has implemented over the past couple of years produced improved third-quarter pre-tax profits, and we have confidence in achieving our fiscal 2021 modeling assumptions. On Slide 6, we have an overview of our international segment, which represents our business within the countries of Bulgaria, Germany, Romania, Serbia, and Ukraine.

In addition to COVID-related disruptions, our international segment is being impacted by extremely dry weather in Romania and parts of Bulgaria and Ukraine, which negatively affected summer and fall crop yields. While European farmers are experiencing some support from improving commodity prices, we remain cautious and are monitoring weather patterns and the condition of the winter cereal grain crops. We continue to focus on the parts and service areas of our international business as customers in these developing markets are looking for higher levels of product support as equipment becomes more sophisticated and technologically advanced. Before I turn the call over to Mark, I would like to thank all of our employees for their fortitude in managing through this challenging environment.

Their commitment to our customers has never been more important, and the results are demonstrated in our strong year-to-date financial performance. With that, I will turn the call over to Mark to review our financial results in more detail.

Mark Kalvoda -- Chief Financial Officer

Thanks, Bryan. Turning to Slide 7. Total revenue was flat with last year at $360.9 million for fiscal 2021 third quarter. Our parts and service business continued its strong momentum in the third quarter, increasing 8.5% and 11.4%, respectively.

Growth was primarily driven by our agriculture segment as we were well-positioned to ensure our customers capitalized on an excellent harvest season this year. Additionally, we continue to benefit from an aging customer fleet and recent acquisitions that were not in our prior-year numbers. Our equipment business decreased 2.1% versus prior year, which was driven by our international segment. Rental and other revenue decreased 24.8% versus prior year due to a smaller rental fleet and lower utilization compared to the prior year.

This was driven by difficult construction industry conditions Bryan discussed earlier, such as lower oil prices impacting our energy markets and an overall slowdown in the economy due to the pandemic. The dollar utilization of our construction segment's rental fleet declined to 25.7% for the current quarter compared to 30.4% in the same period last year. On Slide 8, our gross profit for the quarter increased 1.1% to $72.6 million, and our gross profit margin increased by 20 basis points. The gross profit margin improvement was primarily driven by an increased mix of higher-margin parts and service business as compared to the third quarter of last year.

We reduced operating expense by $4.1 million versus the prior year to $54.1 million for the third quarter of fiscal 2021, which drove a solid improvement of 110 basis points to 15% as a percentage of revenue. We achieved this operating expense leverage despite revenues that were flat with the prior year and the additional operational costs associated with our acquisitions of Northwood and HorizonWest. We continue to have success in managing down our operating costs in the construction and international segments and are benefiting from lower operating expenses caused by the pandemic. In the current quarter, we recognized $2.6 million of impairment costs, compared to $100,000 in the prior year.

Most of the current quarter impairment costs related to the impairment of goodwill and other intangible assets of our Germany reporting unit within our International segment. Floorplan and other interest expense decreased 29.4% to $1.7 million in the third quarter of fiscal 2021 compared to $2.4 million in the same quarter last year. The decrease was due to a lower interest rate environment, a lower interest rate spread under our new bank syndicate credit agreement that we finalized in April 2020, as well as lower borrowings on our line of credit. In the third quarter of fiscal 2021, our adjusted net income increased 21.3% to $13 million.

The adjusted figure for third quarter of fiscal 2021 excludes $3.1 million in adjustments net of taxes related to impairment charges, ERP transition costs, Ukraine remeasurement losses, and an income tax valuation allowance. This compares to the prior year where we excluded $2.5 million of similar adjustments net of taxes. Our adjusted earnings per diluted share for the quarter was $0.58 compared to $0.48 in the third quarter of last year. For the third quarter of fiscal 2021 adjusted EBITDA increased 16% to $24.8 million, compared to $21.4 million in the third quarter of last year.

You can find a reconciliation of adjusted net income, adjusted income per diluted share, and adjusted EBITDA to their most comparable GAAP amounts in the appendix to the slide presentation. On Slide 9, you will see an overview of our segment results for the third quarter of fiscal-year 2021. Our agriculture segment revenue increased 3.1% to $220.6 million driven by ongoing momentum in parts and service, as well as contribution from our HorizonWest acquisition. The higher level of parts and service, combined with the relatively flat operating expenses and lower floorplan interest expense, increased our adjusted pre-tax income by 34.7% to $13.8 million, compared to $10.3 million in the prior-year three-month period.

Turning to our construction segment. Revenue increased 1.3% to $79 million, compared to the prior-year period primarily due to increased equipment sales, partially offset by lower rental revenue. Lower operating expenses, combined with lower interest costs, drove a $1 million improvement in segment adjusted pre-tax income to $1.4 million, compared to $400,000 in the third quarter of the prior year. Our International segment revenue decreased 11.1% to $61.2 million.

The softness in this business that began late in our first quarter continues to persist and impacted our third quarter as well. Lower equipment sales drove the overall decrease in this segment, while parts and service were more stable but still down slightly. The lower sales are the result of difficult end-market conditions Bryan spoke to earlier, including the pandemic and lower crop yields in areas of our footprint. Adjusted pre-tax income declined to $200,000 in the third quarter versus $1.6 million in the prior-year period despite operating expense reductions.

Turning to Slide 10. You will see our first nine-month results. Total revenue increased 2.1% compared to the same period last year. Year-to-date equipment sales increased 1.2%.

Parts increased 7.1%. Service revenue increased 9.2% and rental and other revenue decreased 18%. Our strong agricultural segment performance drove the increases in the equipment, parts, and service categories of revenue, while the soft conditions in our construction segment end markets drove the lower results in rental and other. Turning to Slide 11.

Our gross profit for the first nine months was $193.7 million, a 2.1% increase compared to the same period last year. Our gross profit margin was flat year over year at 19.9% for the first nine months of fiscal 2021. Our operating expenses decreased by $5.3 million or 3.2% for the first nine months of fiscal 2021 to $160.3 million. As a percentage of revenue, operating expenses decreased 100 basis points to 16.4% compared to 17.4% in the prior year.

Impairment costs increased from $200,000 in the prior year to $2.8 million in the current nine-month period. Floorplan and other interest expense decreased $1.6 million or 21.8% to $5.7 million in the first nine months due to the interest expense savings resulting from our retirement of the remaining balance of the company's convertible notes, overall lower interest rates on our floorplan payables and lower borrowings on our line of credit. Our adjusted diluted earnings per share increased 25.9% to $1.02 for the first nine months of fiscal 2021 compared to $0.81 in the prior-year period. On Slide 12, we provide our segment overview for the nine-month period.

Overall, our adjusted pre-tax income was $31.3 million for the first nine months of fiscal 2021 compared to $23.7 million in the same period last year. This 31.9% increase was a result of strong performance in our agriculture segment that was further supported by improved construction segment results and partially offset by lower performance in international. On Slide 13, we provide an overview of our balance sheet highlights at the end of the third quarter of fiscal 2021. We had cash of $41.8 million as of October 31, 2020.

Our equipment inventory at the end of the third quarter was $450 million, a decrease of $66 million from January 31, 2020, reflecting a $36 million decrease in new equipment and a $30 million decrease in used equipment. Equipment inventory turns were 1.6 versus 1.7 in the prior-year period. I will provide a little more color on our inventory on the next slide. Our rental fleet assets at the end of the third quarter decreased to $94.2 million, compared to $104.1 million at the end of fiscal 2020.

We expect to remain around the current fleet levels for the balance of fiscal 2021. As of October 31, 2020, we had $287.8 million of outstanding floorplan payables on $765 million of total floorplan lines of credit. Our adjusted debt to tangible net worth ratio is a strong 1.0 compared to 1.3 in the prior-year period and is well above -- sorry, is well below 3.5, which is the leverage covenant requirement of our two largest floorplan facilities outside our bank syndicate. Turning to Slide 14.

The amount of new and used equipment inventories are reflected in the size of the red and blue bars on this slide. We made additional progress on managing our inventories down in the third quarter with a $66 million reduction versus the beginning of the fiscal year. We continue to have confidence that we will end the year with inventory levels below that of fiscal 2020 despite our May acquisition. The lower inventory levels, combined with our revenue expectations, should improve our equipment inventory turns to 1.7 or possibly 1.8 for the full year of fiscal 2021 from 1.5 in fiscal 2020.

The overall quality of our inventory remains healthy. Currently, 36.6% of our inventory is under noninterest-bearing terms, which can be seen by the gray bar on the slide. Once procurement levels increase, we should see this noninterest-bearing percentage rise as well. Slide 15 provides an overview of our cash flows from operating activities for the first nine months of fiscal 2021.

The GAAP reported cash flow provided by operating activities for the period was $60.8 million, compared to cash used for operating activities of $8.3 million in the fiscal 2020 year-to-date period. As part of our adjusted cash flow provided by operating activities, we include all our equipment inventory financing, including nonmanufacturer floorplan activity, and adjust our cash flow to reflect the constant equity in our equipment inventory, allowing us to evaluate operating cash flows exclusive of changes in equipment inventory financing decisions. After applying these adjustments, our adjusted cash provided by operating activities was $56.5 million for the nine-month period ended October 31, 2020, compared to adjusted cash used for operating activities of $35 million for the same period last year. The substantial increase in adjusted cash flow of $91.5 million is due to improved operating income and inventory levels versus the prior year.

Slide 16 shows our updated fiscal 2021 annual modeling assumptions, which we are raising across the board. While our business is performing well, we believe areas of our business will continue to be impacted by the challenging global economy due to COVID-19, creating a higher degree of uncertainty to these assumptions compared to a normal environment. For the agriculture segment, we are increasing our revenue growth assumption to up 5% to 10% from flat to up 5%. This compares to our year-to-date results, which was up 9.3%.

We expect our fourth-quarter equivalent sales activity to be supported very well by the recent improvement in farmer sentiment, which are being driven by higher commodity prices and for the most part, a completed harvest. However, parts and service are up against much more difficult fourth-quarter comps with prior-year growth for parts at 25.1% and service at 16.5%. It will be difficult to grow out of these high levels, particularly with much lower harvest activity in the current fiscal-year fourth quarter relative to the prior-year period. Additionally, please remember to account for a full-year revenue contribution of approximately $25 million from our HorizonWest acquisition that closed in May 2020.

For the construction segment, we are increasing our revenue assumption to flat to down 5% from down 5% to 10%. The updated assumption accounts for the better-than-expected third-quarter performance where this segment grew 1.3% and assumes a similar small level of growth in our fourth quarter. Also, please consider the January 2020 divestiture of our Albuquerque, New Mexico store, which generated approximately $8.5 million of revenue in fiscal 2020. For the international segment, we are increasing our revenue assumption to down 5% to 10% from down 10% to 15%.

International's third-quarter top-line results did perform better than expected, but our outlook for the fourth quarter still includes lower revenues compared to that of the prior year. From an earnings per share perspective, we are increasing our adjusted diluted earnings per share assumption by $0.35 at the midpoint to a new range of $1.05 to $1.15 for fiscal 2021. This concludes our prepared remarks. Operator, we are now ready for the question-and-answer session of our call.

Questions & Answers:

Operator

[Operator instructions] Our first question comes from the line of Mig Dobre with Baird. Please proceed with your questions.

Mig Dobre -- Baird -- Analyst

Good morning, guys, and congrats on really good execution this quarter.

David Meyer -- Chairman and Chief Executive Officer

Good morning, Mig.

Mig Dobre -- Baird -- Analyst

Good morning. I guess where I'd like to start is with your comments on Slide 4 on the agriculture segment. I'm curious how you think about the sustainability of these improved trends in demand as you look maybe even beyond the near quarter here. There are some moving pieces here, especially in terms of potential USDA support for farmers next year.

Do you think that plays any part or role in dampening equipment demand? Or are you thinking that we're on pretty firm footing and that's sustainable going forward?

David Meyer -- Chairman and Chief Executive Officer

That's a good question, Mig. I think this run we've had in soybeans, I think, surprised a lot of people, including the growers out there. Corn still, I mean, at the elevator, it's still under $4, I mean, in some of our markets. So I mean, fairly close to breakeven with some of that.

So I think as we look into next year, there's some talk about some global dryness around the globe. With the La Niña weather patterns, which could play into this, I still think we need to be looking at the ethanol industry and the amount of ethanol being used -- or decreases in that because of COVID. So like you said, there is a lot of variables out there. I think farmers, even though they're happy for what the current soybeans is doing right now, and that's a real positive.

And a good positive movement in corn and to some extent, wheat, I still think there's a cautious optimism out there, and it's a little bit careful because like you say, there are a lot of moving pieces and a lot of this is going to be weather-related, but as I see the field preparation and the planted acres going to the U.S. and the yield trends are going on, we've got the ability to raise a lot of crops. And what's going to happen is the dollar is going to factor into this a little bit. So like you said, there's a lot of moving pieces.

So I think the trends are great. There's a good farmer sentiment right now, but I still think it's a certain level of cautious optimism out there.

Mig Dobre -- Baird -- Analyst

I see. As it pertains to your modeling assumptions that you've updated here, I'm looking at the plus 5% to 10% in agriculture and what that implies for the fourth quarter. At the pure midpoint of this assumption, it looks like the fourth quarter is implied flattish relative to the third in terms of revenue. Even though seasonally, right, we should be seeing a sequential uptick based on what's happening with equipment demand.

So I guess I'm curious, is this sort of some conservatism that you're baking in here, should we be thinking something closer to the high end of that range? Or is there enough headwind in parts and service to sort of generate this kind of like flattish revenue sequentially?

Mark Kalvoda -- Chief Financial Officer

Yes. Mig, this is Mark. I mean, we definitely have some level of growth in our equipment sales on the ag side for the fourth quarter. So maybe that gets you to the higher end of that, up 5% to 10%, that's there.

But as we did discuss and you just mentioned again, parts and service will be a little bit more difficult with those extremely good comps or those extremely good numbers that we had in fourth quarter last year. But we are showing certainly some level of growth on the equipment sales side in our ag segment.

Mig Dobre -- Baird -- Analyst

OK. OK. So maybe closer to the high end is kind of how you shake out. Sort of a similar question on construction, right? I mean the performance here better than I for one expected and what one would guess, given what's happening with COVID, but if we're, again, looking at your updated assumption, down zero to five for the full year, again, the midpoint, using that as the anchor, would imply that in the fourth quarter, this business ticks up quite a bit sequentially, and it's up high single digits relative to the prior year.

So I guess my question is what informs you to give you the level of confidence to have this modeling assumption? What are you hearing from customers? Because to me, this is a bit of a standout, if you would, in terms of your guidance.

Mark Kalvoda -- Chief Financial Officer

Yes. I think when we were sitting three months ago, we were less optimistic here as well on the construction segment. And we just had a good level of activity growing at that 1.3% during the quarter. We felt good about that, the level of activity that's out there, and that led us to this -- what we have is a similar level, maybe a little bit higher than that level of growth here in the fourth quarter for the CE segment.

So again, there is there is a range there that can take you a little bit stronger or weaker on it, but we are showing some smaller level of growth there in the fourth quarter, similar to what we saw in the third.

Mig Dobre -- Baird -- Analyst

But, Mark, what generated this upside surprise relative to your expectations here? Like what's the culprit?

Mark Kalvoda -- Chief Financial Officer

Well, it came on the equipment sales side of things. Parts and service came in relatively close to where we were expecting. And I guess I can't point to any -- unless BJ, you have something, or Bryan. But as far as any certain sector of our business.

I don't know that there was any one thing in particular that stood out. Other than just kind of elevated across the board. But it was more so on the equipment sales side as opposed to rental and the parts and service.

Mig Dobre -- Baird -- Analyst

Yes. Sorry to keep pressing on this, but you obviously have exposure to the oil patch, and I'm presuming that that's not where you generated upside. Can you give us a sense if it was some of your more urban dealerships that maybe benefit from housing or anything else that there's to know here?

Bryan Knutson -- Chief Operating Officer

Hey, Mig, this is Bryan. Yes. We put a lot of focus on our core case product and a lot of focus on operational improvements internally to drive increased selling activities. And a lot of areas in the construction segment.

So we've been seeing good luck and good results with the increased focus and driving the case product. Especially, yes, as you point out, in a lot of our more rural to mid-level markets, actually, some of our bigger markets were a little more impacted by the COVID, our high-population areas, as well as, like you mentioned, the oil and gas sector, even at today's prices is still down roughly 25% from a year ago. So that's primarily where it's coming from.

Mig Dobre -- Baird -- Analyst

OK. Last question for me on the cost side. I'm curious if we can get some updated thoughts on SG&A. Once again, that line item was quite a bit better than what we expected.

How do you think about this line item sequentially relative to the third quarter? Thank you.

Mark Kalvoda -- Chief Financial Officer

Yes. I think from an expense standpoint, if you look at the fourth quarter, last year, we were running at around $58 million. I think given some of the COVID-related expenses, some of the expense reductions we had, during the year, also offset with some of the acquisitions. I think it will come in less than the $58 million.

But it will come in higher than that $53 million, especially with some -- which is what we had for the current quarter. So call it around $55 million is probably -- $55 million, $56 million is probably a good number to assume for modeling here for the fourth quarter. There's going to be a higher level of commissions with the higher level of equipment sales in our fourth quarter.

Mig Dobre -- Baird -- Analyst

Yes. That makes sense. Thanks for the help, and Happy Thanksgiving, guys.

Mark Kalvoda -- Chief Financial Officer

Thanks, Mig.

Operator

Thank you. Our next question comes from the line of Rick Nelson with Stephens. Please proceed with your questions.

Rick Nelson -- Stephens Inc. -- Analyst

Thanks. Good morning. I want to get update on the acquisition environment, your appetite to acquire. Where would you be finishing in the U.S., international, or construction segments?

David Meyer -- Chairman and Chief Executive Officer

Well, I think like we are a growth company, and definitely, we're always interested in acquisitions. So I think there's two phenomena going on right now, Rick. First of all, with the COVID, I think a lot of the dealers and people that have been moving around and wanting to talk. And we visit, they visit us and just hunker down mode a little bit, wearing masks and not want a lot of traffic in their offices and dealerships and stuff.

So there's a little bit of a pause. And I think, as I talked about on our last call, most of the dealer groups out there have got some fairly sizable PPP loans are acknowledged and they're in that whole process to get their loans forgiven. So it causes a timing issue. But also, that's a pretty good shot in the arm for these dealer groups out there.

So the combination of the COVID, the PPP, going through that whole loan for getting this process is, I'd say it's caused a little bit of a pause, but definitely, we're engaged with a number of potential sellers looking at succession solutions. So yes, definitely, we spend a lot of time in that, and it's part of our model.

Rick Nelson -- Stephens Inc. -- Analyst

Great. Thanks for that. The Northwood acquisition, you've got one year under your belt there, Horizon the last six months under your belt. Can you talk about those two acquisitions are performing relative to your expectations coming into that?

Bryan Knutson -- Chief Operating Officer

Hey, Rick, this is Bryan. Yes, Northwood is right after we acquired, they've had some tough crop conditions out there, back to back very challenged weather patterns, and so on. But integrating nicely. A lot of synergies, very similar product, customer type, contiguous right in the heart of our footprint.

So integrating very well. I'd say coming right in line with our modeling assumption, a little delayed there because of those challenging weather factors. And then as you mentioned, pretty early on, with HorizonWest. But again, we're really excited about that acquisition.

Great employees doing, great customers, a lot of high-value variety of crops with sugar beet, potatoes, corn, soybeans, edible beans, and so on. And good access to water and so on. So we're excited as they continue to come on board. And again, very similar customer type, equipment type and contiguous and right there in our existing footprint.

Again, so pretty early on that one, but we're optimistic as well on the integration of that one as well.

Rick Nelson -- Stephens Inc. -- Analyst

Great. Thanks for the color. There's a new CEO coming in now at CNH Industrial. Any preliminary thoughts on how that might impact dealerships? Have you met with this individual? He is sort of local, I guess.

And potential impacts to Titan?

David Meyer -- Chairman and Chief Executive Officer

Rick, I think he started right after the first two years. So I think he's finishing up a step with Polaris some, but boy, it looks like what a great track record. And I know I've talked to a number of people in the financial community have worked with him, and everything is really positive, strong leader, a great track record produces excellent results. So I'd say it's just a huge plus.

I know within the CNH Industrial organization, they've been spending a lot of time really trying to find a quality individual, and I think they've done that. So I think a little more bounce in everybody's on the step. I know we're excited. He's Midwest.

He understands the product. He understands customers, understands the dealership. So, yes, I think we're excited and a little more bounce than everybody step that we've got a leader, I'm going to be in place here very shortly.

Rick Nelson -- Stephens Inc. -- Analyst

Great. And then finally, if I could ask you about inventory. Nice progress, three consecutive quarters narrowing inventory levels, new and used. Inventory turns, 1.6 times.

Is there a goal you have for inventory turns? And if you could comment also on industry supply. I don't know where you see that today.

David Meyer -- Chairman and Chief Executive Officer

Well, we think these turns, we can get those between that two and three number, especially we start driving more presell. So I'd say right now, we feel good about current inventory levels enough to meet demand to our fourth quarter, I think it's going to come about right. We're having a combination of farmers that want to buy equipment this year for tax reasons and they want delivery in December, and we feel we've got the inventory to do that. And there's other growers out there that are taking a value to presell programs and signing their name to units that will be delivered in calendar 2021.

And right now, there's available slots, and that's good. So I think on both fronts, we feel good about our inventory. And I guess say, long term, we want to continue to improve these turns, and we've got certain stores in certain markets we're seeing this kind of numbers as they keep improving between the two and three level and definitely attainable.

Rick Nelson -- Stephens Inc. -- Analyst

Thanks a lot, David, Bryan, and Mark. Good luck as we push forward.

David Meyer -- Chairman and Chief Executive Officer

Thanks, Rick.

Operator

Thank you. Our next question comes from the line of Larry De Maria with William Blair. Please proceed with your questions.

Larry De Maria -- William Blair and Company -- Analyst

Thank you. Good morning everybody. You talked a little bit about the, I guess, the cautious optimistic outlook for agriculture, really. But we're moving to a period where we're potentially rational gains, and we may even have a nice export market to China.

So I'm curious how you've seen the customer behavior change, I guess, in real-time over the last six weeks as these developments have occurred? And maybe you could tie that into maybe the year-over-year order numbers and the visibility have to the extent that it extends beyond your fiscal fourth quarter?

Bryan Knutson -- Chief Operating Officer

Hey, Larry, this is Bryan. As both Mark and I mentioned, we're seeing significantly improved customer sentiment out there. Almost with each week that goes by, as they've gotten through the harvest here, got a lot of groundwork, which really sets them up nice for next year, gets them optimistic about the improved chances then of better yields next year as well. So I think just tempering or keeping in mind that a lot of our farmers are not making a lot of money at these commodity prices right now.

Some of them have some healing up to do from previous years. So this will really help with that, help shore up their balance sheets, to allow them to pay off some debt. So that's all good as well. But definitely, in the near term, we're quite positive about the near-term outlook, and that's the reason we've raised our revenue and modeling assumptions and guidance.

Larry De Maria -- William Blair and Company -- Analyst

OK. Is there a year-over-year order number you could point to or maybe even looking into the spring based on kind of early order programs and things? Just frame it a bit for us. I would assume the orders are up year over year. Maybe that's a good way to do it.

Bryan Knutson -- Chief Operating Officer

Yes. Our presell, as Dave mentioned, that we continue to try to improve on to help with the inventory turns as well. Order board is up year over year. Generally don't get into the detail, the exact number, and it's improving.

We're seeing, as Dave mentioned, a number of customers here that over the next five weeks, we'll have some tax things with their account, and we'll be looking to purchase on hand equipment right now, which, again, we feel well-positioned for. And then we have a number of other customers looking for spring or summer deliveries, and we'll continue to drive that presell with them. And again, there, we're seeing nice activity. So we're feeling good about the numbers we're seeing there.

David Meyer -- Chairman and Chief Executive Officer

Just to comment a little bit, too, just what happened with these growers on their beans. If I go back to, say, August 7 at the elevator, I think they were getting just a little over $8, $8.02 in, like, say, an average in South Dakota elevator for their soybeans, and then they started to move up gradually. As they started to move up, I think based on recommendations from their marketing people, a lot of farmers started selling 10% of their crop, 15%, and the whole way up. So even though I think yesterday beans closed $11.41, there's a lot of beans that got sold along the way.

And I don't think there's going to be a lot of beans left. I think most of the growers are going to be moving their -- if they still have some left if they're fortunate enough to, but even some of last year's, they forward contracted some because the beans have been in pretty much the dumps for a while, right? So as they started seeing these beans around $9.5 and $10 and stuff, a lot of them were getting contracted. So not all these beans got sold at this $11-some mark, Larry. So but I do think a lot of the inventory will be gone and the exports and the demand still stays up there.

So yes, there's some positive out there. And I think farmers are looking forward to farming next year.

Larry De Maria -- William Blair and Company -- Analyst

Yes. OK. Thank you for that. Now, obviously, you guys have a good parts quarter, and now we're talking about, I guess, I think a flatting out, maybe a part or something into the fourth quarter based on the comp.

I just want to think about the comp into next year based on what you've done already this year. In other words, how big was the impact from the Derecho and these other things that? Are we going to, in other words, have a tough comp next year or because of the Derecho and other factors on the parts side? Or should it still be fairly normal?

David Meyer -- Chairman and Chief Executive Officer

Well, yes, it's kind of interesting that Derecho was -- it's probably one in the 100 years. Are we going to get that -- a third of Iowa was going to get their entire crop flattened, corn crop. So what that did is you mentioned, Larry, all of a sudden, there's a lot of equipment damage. So farmers are coming and buying headliners in parts of their cabs and they're hoppers on their combines, and damage of their hoods and that's some part sales, we're probably not going to get again.

But then again, they probably didn't get the hours on some of the machines. They're not going to have as much as field repairs and the hours and some of that that kind of offsets that. So next year is probably going to get more back into some normal parts situations on that. But you've got to remember, too, next year that they're probably going to get some -- probably some of the best farmland in the world, right, in Iowa, and some of the highest yield potential.

They're going to get back and the chances are that that type of supply is going to be back out there in the industry again. So to answer your question, the comps going into next year, are going to be a little bit trickier and then didn't have that quite as tough a duty cycle, going into the winter, freezed up like we did last year, combined corn in snow on the wood and all that's been done, too. So we're not going to kind of have that like we did this year. If you looked at our parts business in the first quarter, a lot of that was done from some of the really tough duty that was going on in the harvest the year before.

Larry De Maria -- William Blair and Company -- Analyst

OK. So there's some puts and takes into next year. But I mean, it doesn't sound like we should expect that the comp is so massive that it's difficult to overcome all things equal next year, I guess.

David Meyer -- Chairman and Chief Executive Officer

Maybe, Mark, you may want to...

Mark Kalvoda -- Chief Financial Officer

Yes. I mean, a couple of the big drivers here, too, for parts and service. There's some between quarters that happen like what we're talking about here between third and fourth. But just that aging fleet that's out there certainly is still happening.

And we've got a lot of internal initiatives pointed in the direction of growing that parts and service and really impressing the customer on that side of what we do. So that will certainly pay dividends and help us continue to grow into next year as well.

Larry De Maria -- William Blair and Company -- Analyst

OK. Thank you. And then last question for me. You discussed the M&A outlook a little bit already, but not with, let's say great detail.

What's your appetite at this point for larger stuff? I think we all know that there's at least one potentially larger deal out there. Just trying to gauge your interest in thinking about doing something a little bit more transformative than the usual ones and twos?

David Meyer -- Chairman and Chief Executive Officer

Well, Larry, it's difficult. We can't really comment on specific M&A opportunities, and especially in reference what you just talked about, when there's that active go-shop period it, all in place until December 6 or something. So really from that perspective, really difficult to comment on that. But again, we continue to look at all acquisitions, both the one, two, three store tuck-ins and some of these larger dealer groups have been put together over the years, so we continue to look at both and have the balance sheet that can continue to look at those opportunities.

Larry De Maria -- William Blair and Company -- Analyst

OK, fair enough. Thanks and good luck.

Operator

Thank you. [Operator instructions] Our next question comes from the line of Steve Dyer with Craig-Hallum Capital Group. Please proceed with your questions.

Steven Dyer -- Craig-Hallum Capital Group -- Analyst

Thanks. Good morning, guys. Most of mine have been answered already. Just real briefly, as it relates to inventory.

I know you're kind of managing toward those turns in the two to three area. But just trying to get some sense as to whether you feel like as you manage returns, you lose any business. Your inventory is down fairly significantly year over year even as the backdrop in ag especially continues to improve and looks like will be another fairly decent year next year?

Bryan Knutson -- Chief Operating Officer

Yes. This is Bryan. I'll take that. There's a number of activities we do to ensure that we're not sacrificing the business at the expense of turns.

We do keep a minimum level of inventory on hand at all times to try to account for that unplanned purchase. However, as Dave mentioned, so much of it is shifting to presell in our industry. When you think about these tractors and combines nowadays and on the construction side, the X spares, wheel lowers about the price of your average house. And so typically, a lot of planning, our equipment sales consultants do with the customers and preplan those purchases.

You've got some fairly long lead times. A lot of the equipment is spec specific to the customer as well, which are some other advantages of presell. And so typically, we can plan the business pretty well that way through the presell. Again, combined with keeping some level of inventory on hand as well with dealer-to-dealer transfers and then also some level of company inventory.

So between those four pools, we can keep it covered pretty well.

Steven Dyer -- Craig-Hallum Capital Group -- Analyst

Got it. So you're not seeing necessarily any scarcity or disruption with COVID and manufacturing and things like that. Everything is sort of as you'd like it to be at this point.

Bryan Knutson -- Chief Operating Officer

Yes. Definitely, there were some delays with the COVID, but I think it allowed the manufacturers and the dealers to do some destocking and has created some good demand out there as well. It's helping our turns as well and position us well for healthier inventories. And, yes, generally, we get the iron or find the iron.

Steven Dyer -- Craig-Hallum Capital Group -- Analyst

Got it. OK. Thanks, guys.

David Meyer -- Chairman and Chief Executive Officer

Thanks, Steve.

Operator

Thank you. Ladies and gentlemen, that concludes our question-and-answer session. I'll turn the floor back to Mr. Meyer for any final comments.

David Meyer -- Chairman and Chief Executive Officer

Yes. Well, thank you for your interest in Titan Machinery, and we look forward to updating you on our progress on our next call. So have a good day, everyone.

Operator

[Operator signoff]

Duration: 56 minutes

Call participants:

John Mills -- Investor Relations, ICR

David Meyer -- Chairman and Chief Executive Officer

Bryan Knutson -- Chief Operating Officer

Mark Kalvoda -- Chief Financial Officer

Mig Dobre -- Baird -- Analyst

Rick Nelson -- Stephens Inc. -- Analyst

Larry De Maria -- William Blair and Company -- Analyst

Steven Dyer -- Craig-Hallum Capital Group -- Analyst

More TITN analysis

All earnings call transcripts